News and analysis of critical issues in homeland security

July 6, 2011

As deliberations over the debt limit become increasingly mired in the debate over strategies to reduce the federal debt, the previously unthinkable possibility of a U.S. government default looms larger by the day. Up until now, homeland security practitioners seem to have been more concerned with whether or not negotiators would touch their pet programs than whether the damage caused by a prolonged impasse could threaten the safety and security of our communities.

In homeland security and emergency management circles, talk of the unthinkable usually revolves around complex hazards that produce a cascade of failures resulting in ripples of consequences. This time around we are talking about a cascade of failures that will produce a complex hazard the likes of which we have no way of really knowing until they emerge. What is certain is that some effects will be immediate and others will take years to appreciate. Regardless what time scale their emergence or our awareness of them adheres to, one thing is certain: Most of the worst consequences will never go away.

Those who argue that the debt limit does not matter seem to believe in a myth of American exceptionalism that suggests we can do no wrong, that our decisions and actions will not produce the consequences for us that others have suffered, often at our hands. The opposite is more likely true. Our security could be threatened in previously unimagined ways by creditors who force us to swallow the bitter pills we have dispensed so earnestly and eagerly to others.

Nowhere is this more likely than in the developing world. China and India are rapidly approaching the points where their roles will shift from risk takers to risk makers. And those left vulnerable to the risks created by their rising dominance will surely be us.

China’s military and political might worries some. But its economic ambitions, borne as they are of a desire to keep pace with the burgeoning aspirations of the Chinese people, are greater cause for concern if only for the consequences of their pursuit on the climate and therefore our own ecology and environment.

Others who see little urgency in the current situation may fear the economic effects of others’ decisions and actions but gleefully imagine an America whose government can no longer afford to inhibit or interfere with the decisions and actions of her own citizens. These same people apparently see little difference between a natural person and a corporation when it comes to fundamental liberties. Sadly, the same cannot be said of these same individuals’ assessments of the responsibilities of each to the other.

It’s worth reiterating that U.S. government default is unprecedented. This is important for two reasons: First, the effects are not simply unknowable because we haven’t witnessed such an event before, but because we have no clear idea what ripple effects will result. Second, unlike other disasters that involve underlying processes that we do not fully understand and therefore cannot predict, we know with certainty that the effects of this disaster are entirely preventable.

We cannot and should not assume that the sovereign debt crises resulting from other countries’ fiscal and monetary failures presage the effects should Congress and the White House fail in their duties to resolve the current crisis. Our economy is not just the biggest, it is also intimately connected with every other economy on the planet. Several economists have warned that default would not only delay recovery from the recent recession, but could actually trigger a worldwide depression. We cannot assume an economic calamity of this sort would resemble previous economic depressions.

A devaluation of the U.S. dollar and higher interest rates resulting from default would hit pocketbooks and balance sheets immediately. Reluctance of foreign buyers to invest in U.S. treasury bills would require the government to suspend activities almost immediately to meet interest payments rather than risk further defaults. As government dollars began flowing out of the county to repay foreign creditors, job losses would rise almost as fast as the prices of basic goods and services.

Already stressed state and local governments would be hit hardest after a default. The effects of the recent recession emerged there last and have lingered far longer than elsewhere in the economy. The need for structural and systemic reforms rather than simple shifts in emphasis have already become apparent to many public safety executives as evidenced by the recent legislative initiatives to repeal collective bargaining rights and restructure public employee pension obligations.

As Chris Bellavita’s holiday post reminds us, our leaders have to work if they are to preserve our republic. Their deeds must match their words.

Phil Palin for his part reminded us that our forebears equated the ideals of the republic with the pursuit of eudaimonia. How one attains such an ideal was as troublesome to the ancients as it is for us today. Then as now, much of the disagreement centered on the importance of attaining wealth and exchanging external goods.

Agreeing on the virtue of reducing the debt is meaningless if we are not prepared to meet our obligations. Others can only ever truly judge our intentions by our actions. And even the mere suggestion that the unthinkable is now thinkable has had a negative effect on confidence in our government and its leaders.

Emerging from the current crisis, whether it deepens into downright default or not, will depend on how we respond not just to our situation but to one another. When cities and states can no longer afford to provide essential public safety services who will notice? And what will they do about it?

We might well be “too big to fail” I say this because American default would likely spin the world into a cataclysmic depression. American consumption is, in large part, driving the global economy. Soon to be risk makers and especially China know this. In a sense the current creditor-debtor phenomena is the new-MAD.

But we are near-broke. Still we have a lot of equity and seem to manage our American exceptionalism and luxury, albeit on a Chinese credit card.

Some in government seek a degree of austerity but not in the 2011 Greek sense. Simply slow down government spending. As for providing essential public safety services, IMHO we’ll manage and few will notice that we are doing more with less or just less with less.

Americans like most, best resolve a crisis when the crisis hurts most. The current fiscal crisis is not yet bad enough. And if and when the US economy busts, we’ll likely see a host of post-mortems that will say something to the effect of “how did you not see the signs” and “how did you not do the obvious.”

Interesting comment by John! I have been noticing that no accurate depiction of current or recent consumer spending as a percentage of GDP. Traditonally the figure of 70% of USA GDP was consumer spending. I doubt seriously whether that is still true and if not doubt also that USA consumer spending can any longer drive the world economy.

So what will be the redesign of the USA economy? President Obama pitched for high-tech manufacturing in his TWITTER news conference yesterday. But hey the dreams and dreamers live on.

My first choice for a major policy change would be withdrawal from NATO and demobilization of 25% of active military with all qualified being assigned to K-12 schools and public safety with guaranteed salary maintenance for full 5 years or absolutely free tuition and fees for degree programs that lead to repositioning in the economy.

Fewer than 10,000 fully qualified EMs in the USA and this is completely inadequate given size of USA.

There are many of us here on Main Street USA who certainly concur with William Cumming….as someone extensively involved in global trading in the export of coal to both India and China as well as engaged in global business development projects as well as one who had been recruited many years ago by US greedy corporate entities to “outsource” IT/software development projects to India to the benefit of US stockholders, the executive branch of this government is way out of touch – We will have no high tech manufacturing of any substance here – sorry, however We are not to big to fail and failure is very much part of USA today and only to get worse – partisanship and simply arrogant greed is steering us into desperate times — retail sales are slowing, the consumer in front of us in line has far less available to spend and even those who can afford to save, they, to are feeling the pain —

Keep an eye on Iran. Be weary of the Middle East and the Europeans in particular should be watchful of every move – the “Brutes of Tehran” should of been attacked by the US long ago as the evidence of our youth’s blood on their hands has been very evident for many years – scum and nothing more, dangerous and the global community continues to sit and watch them spin their web — a very dangerous and serious consequences for governments everywhere — Watch Egypt – the real story will evolve shortly.

The US has lost its position of strength – live in reality – the Chinese who are buying all the “coal” these days from me and have stockpiled so, so much for at least the next century, they are clever and very much enlightened – do not expect China to hold its position w/us for very much longer – watch and see hw quickly we can falter as both sides of the Congresional aisle still believe that our “entrusted” vote electing them to office had only one purpose, for each of them to promote their own self-interests, self agenda w/not even a whim for the Constitution or our beloved Republic!

Remember, every form of government since Babylon has failed…Whose lead the charge, Barry? Before his election to the Presidency, few if any would have hired him for CEO, his experience lacking – who else is there, Republican or Democrat, folks that claim they can see Russia from their front porch or don’t even know the real facts ’bout Paul Revere’s ride….

Listen, even if they did not reach a deal on debt limit, the “beltway bandits” have made it clear that they will still receive their paycheck no matter what happens….We’re in hot water – As cunning as they perceive themselves, even the legislators frm local to the great chambers, empty in integrity, certainly inept in every way will soon be leaving office for fear of citizenry revolt — the clock is ticking –